Q: I know that industry super funds generally have a good performance – particularly because of low fees, but I wondered, what is the benefit of picking one for your particular industry? I understand how people in some industries may have similar needs but is that really true these days in terms of the distinct benefits that an industry fund offers? For instance, if I work in media, why would Media Super be better for me than say Legal Super. And are there restrictions on which ones you can join? Can I pick an industry fund that I don’t work in if it has a better performance?
Before I answer your question, I just want to flag that low fees are just one element in the long-term performance of a super account, although industry super funds have performed well over the long-term on average, relative to retail super funds. Volatile markets everywhere make it difficult to comment on future comparative investment performance of industry funds versus retail funds. (For the latest performance statistics for super funds, see our special section ‘Is my super fund performing?’ and for the top performing super funds see SuperGuide articles Top 10 performing super funds for 2016 calendar year, and for past 10 years and Super stars! Top 30 super funds over 5 years).
Note that each industry super fund, like all super funds, is likely to invest differently from one another, although the investment option that most Australians have their super money invested in, has a significant proportion of Australian and international shares, and listed property (see SuperGuide articles Low investment returns on your super: what can you do? and Super control: How to switch your super account’s investment option).
Also note that an increasing number of financial organisations are offering lower-fee super funds. (For information on super fees, I encourage you to check out our section ‘comparing super funds’ and the SuperGuide articles Comparing super funds: 10 fees and charges you need to know about and Super fees: Top 10 cheapest funds in Australia).
The reason for having special industry super funds for particular industries is really an historical issue linked to industrial awards.
In the mid-1980s when productivity superannuation (predecessor to the Superannuation Guarantee (SG) system) was first introduced, each industry negotiated awards over time that included 3% productivity super and each award stipulated where that money was to be paid. For example, the building industry has Cbus, the health industry has HESTA (and Health Super, which has merged with First State Super), the retail industry has REST, and the list goes on. The original names of these super funds were long-winded but as time has passed and the marketing strategies of these super funds has become more sophisticated, each super fund has shortened the fund name to something that you can remember.
Check insurance cover
Apart from different levels of investment performance, a particular industry fund may have a different level of insurance premiums (and cover) to another industry fund. The area of insurance is probably going to be where you find the main difference between industry funds. If you can choose your own super fund (see later in article for information on this), then it’s worth shopping around if life insurance and other types of insurance cover are important to you.
Large super funds negotiate group cover on the basis of the profile of its fund membership, and some industries are more dangerous than others which generally mean that the premiums on offer will be different, depending on the type of industry. Many industry funds are now offering an ‘office’ or ‘professional’ category for those fund members in low-risk categories. For an idea of what insurance can cost you in a super fund if you actively choose your own super fund, rather than opt for the super fund chosen by your employer, see the following SuperGuide articles:
- Comparing super funds: Top 20 cheapest funds for life insurance
- Comparing super funds: Top 20 cheapest funds for income protection insurance
Can I join any industry fund?
If you have the right to choose your own super fund (for the purposes of your employer’s Superannuation Guarantee contributions), then you can choose any fund you wish, assuming that a super fund is open to applications from the general public, although your choice doesn’t have to be an industry fund. You can also check out the article Fund choice: Comparing super funds in 8 steps to help you with your selection process.
If you don’t have the right to choose the super fund where your employer’s SG contributions are to be paid, then, if you wish, you can choose your own fund for any additional contributions that you may wish to make.
According to the ATO, you may not have fund choice if your employer pays super on your behalf under one of the following agreements or awards:
- an award or agreement that specifies the super fund that employer super contributions must be paid to
- state industrial award
- preserved state agreement
- federal industrial agreement such as an Australian workplace agreement (AWA), a pre-reform AWA, a pre-reform certified agreement, a collective agreement, old IR agreement, an individual transitional employment agreement (ITEA), a workplace determination, or an enterprise agreement (these are defined terms in Federal industrial relations law).
Note that the federal government is reviewing the lists of super funds available under industrial awards.
If you’re a federal or state public sector employee, then you may not have fund choice.